The IntrepidHealthcare podcast spoke with Phil Stravers, VP of Market Strategy and Development on the topic of, "Helping Small Healthcare Entities Thrive."
You can listen to the conversation here, or read through the transcript of the conversation below.
(3:23) Will You Give Us An IT Overview Of The Market You Serve? What Applications Are They Using? What Are There Biggest Challenges?
Most of our clients are what we would call community and rural hospitals or healthcare entities. These are facilities ranging anywhere from a 25-bed critical access hospital to 150-bed community or regional provider. Most of these organizations have some variety of enterprise HCIS, maybe combined with an ambulatory EHR and a number of other third party systems that make up the enterprise requirements. I was recently at a facility in Texas and they have somewhere on the order of 240 different applications in play, even though they are using one of the top five HCIS vendors. So, they're dealing with a lot of challenges in the sense that there's a big desire to integrate technology, but the number of pieces of technology that they have to bring together to serve the very diverse need in these healthcare settings is significant.
(4:35) Why Are Experts Predicting 1/5 Of US Hospitals Are Seeking Affiliations Within The Next 5 Years?
In my experience there are probably three main drivers for affiliations that I hear from hospitals when I'm out and about:
- Margins are eroding, while compliance efforts and risk mitigation requirements are expanding. This leads healthcare leaders to believe they have to partner with larger entities because they believe the larger entity will have a more robust infrastructure that they can piggy back on to cover their bases.
- Future payment models would indicate that organizations are going to have to get good at managing populations of patients within a geographic region in order to effect quality and capitated care kind of contracts. So, to do that, the concept today assumes that critical mass is required to get to the numbers to justify the enhanced payments. They also need to coordinate or collaborate on care within that geographical region.
- The third reason for affiliation I see is “Fear of the unknown”, or, "early surrender," in organizations that are struggling financially due to margin pressure. Many of the community healthcare organization boards don't necessarily have the stamina or fortitude to do what's necessary to keep their local community healthcare organization thriving. I often hear from leadership that they've already fired all the bullets in their gun in terms of cost reduction, so they have no choice but to align. But, the interesting thing I find is that those same facilities don’t usually talk about how they've fired all their bullets to increase their market share or identify high performing service lines. It sort of stems from a non-profit mentality many healthcare organizations have. They don't see themselves as a business; they see themselves as a necessary service for the community. That's noble and I really appreciate that about them, but there's a balance of both that's needed, whether you're aligned with the health system or not.
There are probably more factors, but those are three that seem to dominate the conversations I've been a part of.
(7:01) What Changes In Healthcare Is Everyone Facing And How Do Leaders Need To Think For The Future?
Well, I alluded to this on the last question, but payment model change is probably the biggest one. We're moving to risk and quality based payments. CMS set a goal that in 2018 that 90% of all payments will be linked to quality and 50% of those will come in the form of alternative payment models. Recently there was an article saying that 750 hospitals in 2016 will have their Medicare payments reduced for being among those with the highest rates of hospital-acquired conditions. So, change isn’t just coming, it's already here. Facilities are just now waking up to the reality.
I think another thing is the demographics of the healthcare consumer are changing. Everyone seems to have an eye on where the baby boomer generation is, but we tend to forget that by 2025 the Millennial generation will make up 75% of the workforce and therefore will control a significant amount of the healthcare spend. At the same time when Millennial’s buying power is exceeding that of Boomers, we've got Boomers reaching retirement age. As a result, they're saying 20% of the population will need to see a doctor on a monthly basis. There's no shortage of need for healthcare, but where we go to get it is going to change. So, you might be headed to a CVS or Walgreens or come into some healthcare organization via a telehealth app rather than the local family clinic.
(8:34) What Is Technology’s Role In The Topic Of M&A?
I recently wrote an article about this because I think a lot of times technology has way too much to do with a decision for a merger. Technology, by design, should be an enabler and an accelerator of business efficiency and process improvement. But too often in healthcare today, we make technology the business objective, rather than the tool to achieve the objective. In my experience, that never works. Too many facilities have been far too focused on implementing technology for compliance sake or they buy software so that they can tell the doctor they did something and in both cases, we miss the entire purpose of technology.
So, where does technology fit in the M&A topic? In my experience, it's a tool you leverage once the business objectives are well defined. Secondly, as it relates to M&A, there are great potentials in the economies of scale in IT. One of the misnomers is that the large health systems have already invested a ton in technology and technology staffing, so layering in a smaller organization should be fairly simple without significant new investment. In my experience, the volumes are different, the business needs are different, and the markets and associated service mix are different. So, if a larger entity is going to be good at supporting smaller organizations, they almost need to develop a system within the system...which really blows up the models for economies.
I'm notably (based on the mission and goals of our company) a bit biased, but I believe that independent facilities could probably get to the same or better economies by working together or by working with consulting partners designed for that purpose. If you take revenue cycle as an example, many smaller organizations have realized great benefits in partnering with outside rev-cycle firms. Largely because those firms have the methods and the depth of staff that are pretty hard to come by in smaller, rural settings. They can also then play the odds of fractional resources to get vertical expertise, etc. To get back to your point, I think IT is part of the decision making process during acquisition, and both the buyer and seller need to be part of it. For a buyer, an small organization that already has their IT house in order should be more attractive to acquire because it speaks to operational discipline and their ability to add value to the enterprise. And for the seller, they probably need to make sure the approach the larger entity will bring fits their needs or they may be jumping into an environment that makes them less efficient and less responsive to their community.
(14:57) What Are Your Recommendations For Evaluating Effectiveness Of IT Before Just Assuming IT Woes Will Be Fixed With An Affiliation?
I think if the organization is questioning effectiveness, they really have no choice but to do some sort of external assessment. In my view, the assessment's actually pretty simple, and in some respects people might think I'm oversimplifying. In my experience, I'm not. Success with IT is really born out of several key elements. I'd be looking for an organization to do a self-assessment or bring someone from the outside in for the assessment. To get an honest assessment is pretty hard to do if you're doing it yourself.
IT Strategy And Annual Plan
You need a good IT strategy and an annual plan that's aligned with the business objectives. If we don't have a plan, the big issue of the day typically rules the decision-making. Each project then compounds daily management difficulties. That's one area I'd be looking at an organization saying, "How are you doing with that?" because it all cascades down from there.
IT Governance Model
From a standpoint of how to execute the plan, I'd be looking at things like an IT Governance Model. One of the keys that have to exist, particularly in these community settings, has to be a well-educated, cross-representative IT steering team. I'm not talking about a technical team, but a decision-making body that oversees the IT plan development and implementation. They're the group that solves issues that may conflict with the plan.
Super User Group
One other thing I'm always looking for is Super User infrastructure. I hear a lot of people giving lip service to this, but not a lot of people doing it right. A couple of key questions on that: Are the responsibilities of the super-users documented in their job description? If one super-user leaves, is there a process for filling that role and orienting the replacement. Often people say, "we had super users during the go-live," but this is really discipline that needs to be perpetuated throughout. If you don't have those, you're not going to be successful whether you integrate with an entity or not. One of the benefits you might actually have, by affiliating or merging, is they're going to enforce these disciplines if they're a good organization.
Resource Plan That Accompanies Your IT Plan
One of the other things I see people getting frustrated in, is they don't have a resource plan that accompanies the IT plan. So they might have done the goal setting for the projects they wanted to do, but they didn't take the next step to allocate resources within IT to say, these are the daily operational requirements that we have that requires this amount of labor, this amount of staffing in order to meet the need. Now we have these projects that require this amount of staffing, and this amount of labor.
What I find is when that's absent; IT always fails to meet the objectives. The entire organizational chart that goes with that, where you start to separate the daily reactive and proactive disciplines from the projects is a pretty big deal.
Professional Project Manager
Often organizations are not leveraging professional project management, and people make the mistake of expecting the software vendors to provide that. You wouldn't build a building without a general contractor, but we do the equivalent with IT project management all of the time.
In many cases, what you end up with is you have under-utilized technology, an under-informed, under-empowered user base that isn't getting the return on the investment. Now that stimulus has stopped paying for these projects, those chickens are going to come home to roost. We're going to actually have to show a return on this investment somewhere. Right now it's pretty dismal. A lot of that has to do with the fact that there weren't stated goals, stated project charter, and a method to follow for implementing to those goals and charters.
(20:15) What’s Next For ICE Technologies? Is There Anything New That Customers Can Expect From You As We Head Into 2016?
One of the things that is a bit of a remix on an old song for us is that we're really working to create new service offerings that empower that local IT Director. For many years, we just had to be that (fill that role on an outsource) and we're finding an evolution and a maturing of the market. Not every community can find IT resources, so we still have to augment a significant amount. But, one of the things we're really emphasizing in 2016 is, how we train, teach, mentor and provide toolkits for an IT Director in those community healthcare settings.
Another one we're always staying in front of is this shift to ambulatory. We've been working on projects to help mesh the ambulatory environment with acute care. That has to do with interoperability interfaces and exchanges. So, a lot of what we're doing there is consulting on regulatory requirements and tools and pieces that exist in that space.
We're doing a fair amount on the data side now where we create custom dashboards. With our practical bent, we're using standard Microsoft SQL tools for the most part, not some fancy analytics platform. With a lot of those platforms, you still have to spend more money in the acquisition and still have to write custom queries to make it worthwhile. We just jump right to writing the queries and serve it up using a tool like SSRS.
We find success with those analytics tools and queries from a standpoint of monitoring end-user behavior in the EHR. We see all these problems about clinician engagement, doctor engagement, and a lot of what it comes down to is the inconsistency of work and usage. We can drive data out of the system to show where those inconsistencies are happening and create new efficiency.
We've started to integrate Lean into our approach for evaluating and optimizing the use of these technologies. The A3 process tailored for these settings does a great job removing IT from the conversation and put value to the patient at the center. We're really excited about some of the early results we've been seeing when integrating our Lean practice with our clinical technology improvement group. We're seeing great results in all kinds of different care settings.
Thanks for having us, IntrepidHealthcare!